Suppose You Held a Well-Diversified Portfolio with a Very Large

question 21

Multiple Choice

Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds. If the σ of your portfolio was 0.30 and σ_M was 0.16, the β of the portfolio would be approximately

• A) 0.64.
• B) 1.80.
• C) 1.88.
• D) 1.56.

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Definitions:

Flooding

A behavioral fear-reduction technique based on principles of classical conditioning; fear-evoking stimuli (CSs) are presented continuously in the absence of actual harm so that fear responses (CRs) are extinguished.

Unconditioned Stimulus (UCS)

A stimulus that elicits a response from an organism prior to conditioning.

Pavlov

A Russian physiologist known for his work in classical conditioning, particularly his experiments with dogs and salivation.

Meat Powder

A substance used in Pavlov's experiments that, when presented to dogs, would cause them to salivate, demonstrating classical conditioning.